User-oriented product innovation - Some research findings

Successful product innovation requires information about user needs. The provision of such information is a question both of attitudes and methods. A number of leading companies in Europe, Japan and the U.S.A. demonstrate the importance of a market-oriented attitude and close contact with users. In-depth studies in Germany, Italy and Norway have revealed an array of tools that are available for the systematic assessment of existing and future needs.Most firms will benefit from a stronger market orientation. However, if one moves too far in this direction, societal needs may be neglected and technological opportunities missed. The aim should be a balanced orientation where the needs of all stakeholders are taken into consideration.     

An update on Bayesian updating

This paper reports an experiment in which subjects are asked to assess probabilities for unknown events, with treatments that vary the extremity of the prior information. Probabilities are elicited using a Becker–DeGroot–Marshak procedure that does not depend on assumptions about risk aversion. The focus is on the pattern of biases in information processing.     

Copula-based nonlinear modeling of the law of one price for lumber products

This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.     

Water Externalities: Tragedy of the Common Canal

Laboratory experiments are used to investigate alternative solutions to the allocation problem of a common‐pool resource with unidirectional flow. Focus is on the comparative economic efficiency of nonbinding communications, bilateral “Coasian” bargaining, allocation by auction, and allocation by exogenous usage fee. All solutions improve allocative efficiency, but communication and bilateral bargaining are not generally as effective as market allocations. An exogenously imposed optimal fee results in the greatest allocative efficiency, closely followed by an auction allocation that determines the usage fee endogenously.     

Learning and Noisy Equilibrium Behavior in an Experimental Study of Imperfect Price Competition*

We consider a duopoly pricing game with a unique Bertrand–Nashequilibrium. The high‐price firm has a nonvanishing market share, however, and intuition suggests that observed prices may be positively related to this market share. This relationship is implied by a model in which players make noisy (logit) best responses to expected payoff differences. The resulting logit equilibrium model was used to design an experiment in which the high‐price firm's market share varies. The model accurately predicts the final‐period price averages. A naive learning model predicts the observed differences in the time paths of average prices.     

Agendas and Strategic Voting

This paper describes a simple classroom experiment in which students decide which projects to fund on the basis of majority voting. Several agendas are used to generate a voting cycle and an inefficiently high level of public spending. Classroom discussion allows students to discover for themselves how to manipulate outcomes through agenda design and strategic voting. The exercise leads naturally to a discussion of political institutions and the size of government. Use: This experiment can be used in introductory and public economics classes to teach concepts of voting cycles and inefficiencies in public choice. Time required: Twenty minutes for reading instructions and taking votes and 15 minutes for discussion. Materials: A printout of the instructions for each participant and one deck of ordinary playing cards for each group of seven voters.     

Classification of commercial bank loans through policy capturing

The judgmental policy of a group of national bank examiners in classifying commercial bank loans was identified using stepwise multiple discriminant analyses and was expressed in the form of a linear model. Credit scenarios (which were composed of both financial and non-financial cues) were presented to 24 national bank examiners at the Office of the Comptroller of the Currency (OCC) in Washington D.C. Each examiner received 20 scenarios and was asked to classify the scenarios in one of the five classifications used by the OCC. Based upon 75% of these observations, a linear discriminant model was developed using stepwise MDA analyses. The remaining observations were used to validate the model developed. Non-financial variables appeared to be important discriminators; the financial variable of industry comparison of the interest coverage ratio using cash flow was an excellent discriminatory variable; and industry comparisons and trends of financial variables appeared to be more important than the variables themselves. The model developed contained two of these variables: (a) an industry comparison of the interest coverage ratio using cash flow and (b) the trend of the debt/equity ratio.     

How global brands compete

It's time to rethink global branding. More than two decades ago, Harvard Business School professor Theodore Levitt argued that corporations should grow by selling standardized products all over the world. But consumers in most countries had trouble relating to generic products, so executives instead strove for global scale on backstage activities such as production while customizing product features and selling techniques to local tastes. Such "glocal" strategies now rule marketing. Global branding has lost more luster recently because transnational companies have been under siege, with brands like Coca-Cola and Nike becoming lightning rods for antiglobalization protests. The instinctive reaction of most transnational companies has been to try to fly below the radar. But global brands can't escape notice. In fact, most transnational corporations don't realize that because of their power and pervasiveness, people view them differently than they do other firms. In a research project involving 3,300 consumers in 41 countries, the authors found that most people choose one global brand over another because of differences in the brands'global qualities. Ratherthan ignore the global characteristics of their brands, firms must learn to manage those characteristics. That's critical, because future growth for most companies will likely come from foreign markets. Consumers base preferences on three dimensions of global brands--quality (signaled by a company's global stature); the cultural myths that brands author; and firms' efforts to address social problems. The authors also found that it didn't matter to consumers whether the brands they bought were American--a remarkable finding considering that the study was conducted when anti-American sentiment in many nations was on the rise.     

Reviews

Book Reviews in This Article: W. E. Wightman . The Lacy Family in England and Normandy, 1066-1194. H. S. Bennett . Life on the English Manor: A Study of Peasant Conditions, 1150-1400. Margaret Wood . The English Mediaeval House. D. Portman . Exeter Houses, 1400-1700. Patrick Collinson . The Elizabethan Puritan Movement. Calendar of the Patent Rolls. Preserved in the Public Record Office. Elizabeth I. Margaret Cash (Ed.). Devon Inventories of the Sixteenth and Seventeenth Centuries. P. E. Jones (Ed.). The Fire Court: Calendar to the Judgments and Decrees of the Court of Judicature appointed to determine differences between landlords and tenants as to rebuilding after the Great Fire. G. E. Fussell . The English Dairy Farmer, 1500-1900. A. Andréadès . History of the Bank of England, 1640-1903. P. G. M. Dickson . The Financial Revolution in England. A Study in the Development of Public Credit, 1688-1756. Robert Munter . The History of the Irish Newspaper, 1685-1760. W. A. Mc Cutcheon . The Canals of the North of Ireland. J. D. Williams . Audley End. The Restoration of 1762-1797. W. E. Minchinton (Ed.). Politics and the Port of Bristol in the Eighteenth Century. Stanley D. Chapman . The Early Factory Masters. The Transition to the Factory System in the Midlands Textile Industry. Phyllis Deane . The First Industrial Revolution. J. Child . Industrial Relations in the British Printing Industry. The Quest for Security. Werner von Siemens . Inventor and Entrepreneur: Recollections of Werner von Siemens. Kurt Grunwald . Türkenhirsch: A Study of Baron Maurice de Hirsch, Entrepreneur and Philanthropist. J. D. Bailey . A Hundred Tears of Pastoral Banking. A History of the Australian Mercantile Land and Finance Company, 1863-1963. F. B. Smith . The Making of the Second Reform Bill. W. R. Powell (Ed.). A History of the County of Essex. Peter Mathias . Retailing Revolution. A History of Multiple Retailing in the Food Trades based upon the Allied Suppliers Group of Companies. Marc Bloch . French Rural History: an Essay on its Basic Characteristics. J. P. Nettl . Rosa Luxemburg. Erich Gruner and Karl Frei . Die schweizerische Bundesversammlung, 1848-1920 L'Assemblée fédérale suisse, 1848-1920. Richard Colebrook Harris . The Seigneurial System in Early Canada. Geographical Study. Ashin Das Gupta . Malabar in Asian Trade, 1740-1800. David Birmingham . Trade and Conflict in Angola.     

Generalized habit formation in an Inverse Almost Ideal Demand System: An application to meat expenditures in the U.S.

The Inverse Almost Ideal Demand System (IAIDS) model of Moschini and Vissa (1992) and Eales and Unnevehr (1994) is extended to include: (1) general, nonlinear, nonadditive habit effects; and (2) a specification for habit stock terms that allows purchases from the distant past to influence current consumption (long memory). The resulting models are compared with a linear habit effects model and a static specification. The empirical estimation is on U.S. quarterly meat expenditures (1961–1993), with each model being subjected to a battery of misspecification tests. Results of these tests, along with tests of homogeneity and symmetry restrictions, indicate clearly that the most generalized dynamic specification-the one with nonlinear, nonadditive long-memory habit stock effects-is preferred. Furthermore, persistence effects are found to be qualitatively important in that flexibility, consumption scale, and habit flexibility estimates differ, in some instances substantially, between alternative specifications.